Business loan guide
Business Loan Eligibility: How to Get a Business Loan
There’s no single test for a business loan. Each lender sets its own criteria, but most look at the same things, including how long the company has been trading, what it earns, whether it can afford the repayments and how it has handled credit before.
This guide explains what lenders usually check, what to prepare, how applying works and what to do if a lender says no. It’s written for UK businesses.
When you’re ready, Wize Finance can help your business see which types of finance may suit it.
When you're ready, share the amount, your business and how to reach you. The team reviews your enquiry and discusses what lenders are likely to look at.
What lenders usually check
Lenders weigh these checks together. Falling short on one doesn’t always rule a business out, and being strong on one doesn’t guarantee a yes.
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The type of business. Lenders want to understand how the business is set up (for example a sole trader, partnership, LLP or limited company) and that it has a UK business bank account. Some products are only available to certain structures. If you’re a sole trader, see Sole Trader Business Loans.
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How long it has been trading. Many lenders prefer an established trading record, often shown in filed accounts or tax returns. Some consider younger companies, usually for smaller amounts.
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What it earns. Lenders look at turnover and profit, and at how steady income is from month to month, usually through business bank statements and accounts.
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Whether it can afford the repayments. The main question is whether the company’s cash flow can cover the new repayments alongside everything it already pays out.
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Credit history. The business’s credit record and, often, the personal credit records of its owners or directors, including any missed payments, defaults or county court judgments.
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What it already owes. Existing loans, overdrafts, finance agreements and tax owed all affect how much more a company can take on.
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What the money is for. A clear purpose and a realistic plan for repaying help a lender judge the risk. Some lenders don’t fund certain purposes or sectors.
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Security and guarantees. Some lending is secured on property or other assets, and directors are often asked for a personal guarantee. Whether either is needed depends on the lender and the product.
What to prepare before you apply
Having the basics ready makes an application quicker to assess and helps you spot problems before a lender does. A typical list looks like this:
Lenders ask for different documents depending on the product and the amount, so treat this as a starting point rather than a complete list.How applying for a business loan works
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Work out the amount and the purpose.
Borrowing more than you need costs more, and borrowing too little can leave a gap. Be clear about what the money will pay for.
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Check what the business can afford.
Look at monthly cash flow after existing commitments, and how the repayments would fit in a quieter month.
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Choose the type of finance.
A term loan isn’t always the best fit. Invoice finance, asset finance or a line of credit may suit some needs better. The Business Loans guide compares the main options.
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Gather your documents.
Have bank statements, accounts and details of existing borrowing ready before you apply.
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The lender assesses the application.
It reviews the documents, usually runs credit searches and may ask follow-up questions or request more information.
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Review the offer before you accept.
Check the total amount repayable, fees, the term, any security or guarantee, and what happens if you want to repay early.
Where a Wize Finance enquiry fits
A Wize Finance enquiry is a short first step, not a loan application.
You tell us roughly how much you’re looking for, which business it’s for and how to contact you. We use that to understand what your business may need and which types of finance could be worth exploring.
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It isn’t a lending decision. Only a lender can approve finance, after its own assessment.
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It doesn’t promise an outcome. Sending an enquiry doesn’t mean you’ll be approved, or offered particular terms.
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It helps decide the next step. That might be a conversation about your options, the full application, or pointing you to a type of finance that fits better.
What lenders usually check
- What it earns
- What it owes
- Credit history
Know roughly what you need?
Tell us about your business and what the money is for, and see which types of finance may suit it.
How to strengthen an application
There’s no way to guarantee a yes, but some things are within your control before you apply.
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Keep your records up to date. If the business files with Companies House, make sure its accounts and details are current. Late filings or details that don’t match can raise questions.
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Keep business money separate. A dedicated business bank account gives a lender a clear picture of what the business earns and spends.
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Ask for what the business needs. A realistic amount with a clear purpose is easier for a lender to assess than the most you think you could get.
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Show how it will be repaid. A simple cash-flow forecast can show how the repayments fit alongside what the business already pays out.
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Explain anything unusual. A one-off dip in income or a past credit problem is easier for a lender to assess when you give the context up front.
If your company doesn’t fit the usual criteria
Not meeting a typical lender’s criteria doesn’t always mean there’s no option. Some finance is designed around particular situations.
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Trading for a short time. See New Business Loans for recently trading companies, or Startup Business Loans if the business is just starting out.
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Past credit problems. See Bad credit business loans for how lenders look at missed payments, defaults and county court judgments.
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No personal guarantee. See Business Loans Without a Personal Guarantee for what may be possible and what it usually involves.
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Not yet trading. The Government Business Loans guide explains government-backed options, including Start Up Loans.
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The need is tied to invoices or equipment. Invoice Finance and Asset Finance look more at the invoices or the asset, so they can suit some companies that find a loan harder.
The right question isn't only 'will a lender say yes?' but 'which kind of finance fits this company?'
If a lender says no
A no from one lender isn’t always the end of the road. Lenders and types of finance weigh things differently, and Wize Finance can review your circumstances and discuss which options may still be open.
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Ask why. Lenders don’t always give detailed reasons, but many will say what the main issue was.
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Check the credit files. Look at the company’s credit file and the directors’ personal files, and correct any mistakes.
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Don’t apply again straight away. Several applications in a short time can make lenders more cautious.
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Change what you can. A smaller amount, a different type of finance, security or a longer trading record can change the answer.
Business loan eligibility FAQs
What do I need to get a business loan in the UK?
Most lenders want to see a registered business with a trading record, regular income, recent bank statements and accounts, and enough spare cash flow to cover the repayments. Many also look at the credit history of the company and its directors. Exactly what’s needed depends on the lender and the type of finance.
Can a new business get a loan?
Sometimes. Many lenders prefer a longer trading record, but some consider businesses that have been trading for a shorter time, often for smaller amounts or with a personal guarantee. Businesses that haven’t started trading usually have fewer options.
Will I need to give a personal guarantee?
Personal guarantees apply to borrowing by companies and LLPs. Sole traders and partners are usually already personally responsible for business debts. It’s common for lenders to ask directors of limited companies for a personal guarantee, particularly for unsecured lending. A guarantee means the director can be asked to repay if the company can’t, so it’s worth understanding exactly what you’re agreeing to before you sign.
Does applying for a business loan affect my credit file?
A full application usually involves a credit search on the company, and often on its directors, and lenders may record that search. How a search is recorded depends on the lender, so ask before you agree to one.
Why might a business loan application be turned down?
Common reasons include a short trading record, low or irregular income, repayments that don’t look affordable, existing debts, past credit problems, or a purpose the lender doesn’t fund. A lender that says no may still explain the main reason if you ask.
How much can my business borrow?
It depends on what the business earns, what it can afford to repay, what it already owes, whether security is offered and how much the lender is prepared to lend for that purpose. There’s no fixed multiple that applies to every lender.
Ready to see what may suit your company?
Tell us about your business and what you need the money for, and see which types of finance may suit it.
- what you need
- what it's for